Hong Kong's housing market doomed to retreat as trade war deepens, says Credit Suisse

By Cheryl Arcibal and Lam Ka-sing / https://www.scmp.com/property/hong-kong-china/article/3013063/hong-kongs-housing-market-doomed-retreat-trade-war-deepens?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | June 7, 2019 12:04 PM SGT
The escalation of the US-China trade war could derail the recent upbeat outlook on Hong Kong real estate, with Credit Suisse predicting that all segments of the property market will see a decline in prices this year.
The Swiss bank said credit conditions could tighten further as banks become more reluctant to lend, leading to a rise in the Hong Kong interbank offering rate (Hibor), the interest rate at which banks lend to each other.
"As the trade tensions escalate, we're likely going to see slower economic activity in Hong Kong and also in China. Therefore we're likely to see Hibor moving up or at least it's not going to be softened to the current level. And therefore the impact on property prices is definitely going to be negative," said Selina Sia, head of equity research for Greater China, Credit Suisse Private Banking.
The cautious view is the first by Credit Suisse on Hong Kong's property market outlook this year.
Stephanie Lau, vice-president at Moody's Investors Service, maintained her forecast of a rise of 8 per cent to 10 per cent in 2019, though short term "blips" to the downside of 2 per cent to 3 per cent were possible within the sustained uptrend.
In May, Swiss bank UBS issued an upbeat forecast on Hong Kong property, saying the bull market has another 10 years to run, as housing supply fails to keep up with the new population pouring in from the Greater Bay Area.
Sia's forecast for a decline in property prices came in the wake of deteriorating economic indicators both in Hong Kong and in mainland China.
Selina Sia, head of equity research for Greater China, Credit Suisse Private Banking. Photo: Handout
China's manufacturing purchasing managers' index, a gauge of sentiment among factory operators, eased to 49.4 in May, down from 50.1 in April.
In Hong Kong, retail sales fell...